Tag Archives: Amazon

We’re in the home stretch of 2017. I don’t foresee anything dramatic happening between now and the 31st that would impact the assessment of my 2017 predictions. I’m using the same rules as I always do. Each prediction will be evaluated critically. An accurate prediction will garner 1 point. A miss, earns a fat 0. I try to avoid the middle, but if a situation should arise where a prediction could be considered accurate by some, it will generate 1/2 a point.

So, let’s get on with it! The original prediction from 2017 is listed first and in bold font. The analysis follows.

“Voice” will be the new battleground and by the end of the year, we will see Amazon, via Alexa as the clear cut #1, in the category. As part of this, Apple will release a Siri home product, but it will not succeed in besting Amazon or Google. Ding, ding, ding! In June, Apple announced the HomePod. Originally scheduled to launch in 2017, it’s now been delayed til 2018. Apple has a long way to go to catchup with Amazon.

The prevailing theory is that the iPhone 8 will be a revolutionary step forward for phones in the way the original iPhone was. It won’t be, as measured through new hardware and software features. Despite that, the iPhone 8 will outpace iPhone 7 sales, globally. This is the classic case of earning 1/2 a point. The iPhone 8 was not a revolutionary step forward, but it hasnot outpaced iPhone 7 sales. However, this comes with the caveat that I, nor did anyone else see the iPhone X coming.

In a similar way to how vinyl is propping up music sales, we will see a renaissance in real books. Yes, books, the kind with actual paper, will see growth. Since this is supposed to be the “clear cut” section, I believe as a %, books will outpace the sales growth of digital/ebooks. This definitely happened. Per CNN, “The same trend is on display in the U.S., where e-book sales declined 18.7% over the first nine months of 2016, according to the Association of American Publishers. Paperback sales were up 7.5% over the same period, and hardback sales increased 4.1%.”

The term “predictive analytics” will displace “big data” as the buzzword du jour for marketers. This will happen as companies realize they already have lots of data, but they need to start using it in a way that isn’t about looking back. We will measure this with Google Trends. This did not happen, was not even close. Epic fail. I actually do think this is happening at organizations, but it hasn’t become mainstream enough for Google Trends to pick up on it.

The Verizon-Yahoo merger will continue as planned. It will be the 1st of 3 large such mergers that will be announced or close in 2017. Consolidation is the only path forward, when 99% of the digital ad growth is split between Facebook and Google. This happene. Verizon and Yahoo! became Oath. What were the other 2? Well the AT&T – Time Warner merger was announced, but hasn’t closed. The other? Well, that’s the hotly debated Sinclair – Tribune merger.

We will see a significant decrease in social media sharing, but not necessarily usage. There will be more consuming of “content” than there will be in sharing that content. This drop in sharing will be fueled by 3 reasons. First, with the continued rise of “gotcha journalism” and social justice warriors, people will think before they tweet, so to speak. The fear of retribution for posting something, initially thought of as innocuous, will decrease the willingness to share. Second, the rise in the combination of “pay wall” type approaches to content with “fake news” will make people less inclined to want to share. Third and last, as Facebook and others becomes more and more of media/content creators, the walled garden approach to building networks will stunt cross platform and network sharing. 20%!!!! That’s how much sharing is down on Facebook. Dang! Yeah, I nailed this one.

Facebook will see the wrath of the new administration. In a similar way to how Microsoft was seen as monopolistic and anti-competitive, Facebook will be targeted for the same reason, in addition to being targeted for their perceived control over how what media is consumed. The attempts by Facebook to curb “fake news” will backfire. Fiscally it was a good year for Facebook. But, reputation-wise, it was not a good year. My prediction accurately forecasted that Facebook would be targeted by the administration and the attempts to fix fake news, did not work.

In 2016 we saw a handful “startups” get acquired by the legacy companies they compete against. For example, Dollar Shave Club’s purchase to Unilever and Jet.com’s purchase to Walmart. In 2017 we are not only going to see more of this, but we’re going to see it happen in unique and unexpected ways. For example Whole Foods acquiring Instacart or Target purchasing Refinery29. So, yeah, this happened A LOT this year. Take your pick. We have Amazon buying Whole Foods. Then we have Ikea buying TaskRabbit. I still expect Instacart to be purchased by a retailer at some point.

Twitter will sell to an unlikely buyer. For example, Bezos (not Amazon) will buy it and then bolt it on to WaPo. Another unlikely buyer would be someone like Microsoft, who would then integrate it into things like LinkedIn and Yammer! An example of a likely buyer would be Google. Fail. Total swing and miss.

I’m bringing forward a prediction from 2016. I think I was spot on, but a year early. Snapchat will IPO, but the IPO will flop. Did I say flop? I should have said crashed and burned. The IPO started at $17 and then rose to $24. It sits below $15 now and the future does not look bright at all.

So, how did I do? 7.5 out of 10. I missed on Twitter selling, predictive analytics over taking big data and the while the iPhone 8 was in fact not revolutionary, it did not outpace iPhone 7 sales. If we go back to 2012, my 5 year total to 71% (42.5/60). This was a good rebound year. Over the next few weeks I’ll be working on my 2018 predictions. There’s going to be a lot chew on for next year.

What isn’t connected to the internet, these days? Toasters? Yep. Thermostats? Check! Lights? You bet. But, what about crockpots? Oh, most definitely. Just about anything that could be connected to the internet, is in fact already connected or will be. That is, by definition, the internet of things. We were promised, the “smart home.” The idea being that with our devices connected to the internet, they would become more intelligent and that new found intelligence would create efficiency, save money, reduce friction and bring about joy.

“Machine learning” and “automation” aren’t consumer facing terms, but they are the underlying reasons why a smart home, could be, just that. Your Nest Thermostat learns your preferences. It knows when you’re home, when you’re gone and when you’re sleeping. It adjusts the temperature to align with those factors and to save you money. That’s the very definition of “smart.”

The past few years were focused on making all of our devices smarter. On some level, they’ve succeeded. Today, the focus is on the combination of internet connected things, machine learning and automation coming together to bring you some form of artificial intelligence. That sounds exciting. After all, who wouldn’t want their very own version of Iron Man’s J.A.R.V.I.S? Amazon has Alexa. Google has Home. Apple has Siri (though not in a device beyond your laptop, phone or tablet). There are more. They’re coming.

I have booth a Google Home and an Amazon Alexa. Considering my own usage and what I’ve observed from other owners, I am convinced, that these devices, in their current format, are making us dumber.

Go back 20 years and imagine a debate in a bar, during a basketball game about whether Michael Jordan had 6 MVPS or 5. That debate would rage on. You would ask other patrons. In doing so, you’d interact with them. You might engage the bartender to answer this question. At some point, you might go to the library or use your computer, after you’ve left the bar, to find the answer and thus, settle the debate. The smart phone came along and it changed that experience, forever. We had answers in a handful of taps. On one hand we were more informed, with limitless knowledge at our fingertips. On the other hand, we became people incapable of making eye contact with one another for more than 10 seconds.

“Personal Assistants” like Alexa and Home are a natural extension of the phone, right? Instead of typing, “how many MVPs does Michael Jordan have?”, I can now just say, “ok google, how many how many MVPs does Michael Jordan have?” For the record, he has 5. He was robbed of a 6th, because writers felt bad that no one else was winning MVPs. So, one year, they gave it to Karl Malone. I digress. Back to the topic at hand; so, why do I think these devices are making us dumber?

Erosion of People/Social Skills: as explained above, we’re losing the ability to carry conversations. While, yes, there will be more and more technology in our lives, I don’t foresee a world, where we never work with, nor have to interact with people.

The Dumbing Down of Language: to get the most out of Alexa, Siri, Home and others, you speak a broken down version of your natural language. Our “English”, if you will, has become laughable. Because we’re being trained to issue commands that are understood by the software, we omit words or convert the proper spoken word into something so basic, it resembles a toddler first learning to speak.

The Elimination of Context: Part of why you’re taught “why” in math instead of how to “ask” a calculator for the answer, is so that we have foundational knowledge. Why? Because, that added context will help us learn how and when to apply the foundational knowledge in real world situations. Geometry teaches us to play pool better. Seriously. Answers, without context, are not just lazy, they undermine our thirst for knowledge. Information, is not, knowledge.

The future is going to be digitally driven and internet connected. There is no doubt. But, if the starting point for what my kids, Cora (age 9) and John (age 7) learn, is a broken down form of language, that teaches them to conform to the norms of an algorithm over traditional social skills and that they shouldn’t have to learn about the underlying context to an answer, aren’t we just raising robots?

Last week, 200,000 people from across the world descended on Las Vegas for the Consumer Electronics Show. The modern day version of CES is a little over 10 years old. What was originally, a must see conference for major technology companies to announce new products, has now become the place for technology, marketing and devices to converge.

I joined the other 199,999 attendees, along with our agency partners. We spent 3 solid days meeting with potential partners, existing partners and partners reinventing themselves for the future. In addition to roughly a dozen meetings, we also walked the trade floor, soaked up knowledge via panels and keynotes and spoke with leaders at companies ranging from QSR, telecom, fashion and everything in between.

To say, we absorbed a lot, would be an understatement. There’s already a lot of great CES recaps out there. I encourage you to checkout the hubs from The Verge and TechCrunch. They both did a great job of organizing the key themes, best innovations and biggest flops.

While The Verge and TechCrunch are covering everything, I’m going to focus on the themes and findings that resonated with me and that I’m taking into the office.

CES 2017 was more evolution than revolution. During a panel with Dennis Crowley, the Chairman of Foursquare, it was stated: “2015 was the year of VR, 2016 was the year of VR and 2017 is the year of VR.” The point being that in 2015 it was VR for early adopters. In 2016 it was VR for developers. And in 2017 it’s 2017 for consumers. That continued iteration of a trend was present across just about every area of technology. For example, we are seeing more and more internet of things devices. They are becoming more mainstream. Though, just because it’s becoming more mainstream, doesn’t mean it’s becoming more practical or useful. For example, how many of you always wanted a wifi trash can or a hairbrush that acts like a pedometer to help you improve your hair quality?

With that continued evolution of internet connecting devices, there are now more ways than ever before for people to consume content. This is a gift and a curse for marketers. Yes, there are more ways to provide value, but there are also more ways to interrupt the consumer. Additionally, the marketing landscape becomes increasingly more fragmented, making it even more challenging to measure impact and return.

A major topic across the conference was security, privacy and data sharing. All those connected devices are becoming smarter. For example your Nest Thermostat learns your heating and cooling habits, eliminating the need for you to set the temperature. This removes friction. But, how does that happen? It happens, because people are sharing and providing those devices more and more personal information (even if they don’t realize it). There are edge cases, already that are pushing the limits of what devices know about you and how valuable that information is. For example, data from a consumer’s Amazon’s Alexa account is being subpoenaed as part of a murder investigation. In the health category, companies like FitBit, Qualcomm and United Healthcare are striking partnerships that bring about major cash incentives for sharing your data.

If there was a major buzzword from CES 2017, it was “immersive” – This is a catch all term for Virtual Reality, voice input (e.g. Alexa and Google Home), Augmented Reality (e.g. Pokémon Go) and smart accessories/clothing (e.g. Snapchat spectacles). This is all about technology finally becoming something that enhances your daily life without the need to use your phone, necessarily. One could argue “immersive” is just a fancy way to say, “customer experience.” The customer experience is not linear and it’s not single device driven; it us however a convergence of the real world and technology.

For the first time in recent years, mobile was not being seen as the future or an enhancer. If anything, there was more discussion about mobile phones holding back the future. If 5 years ago, the question was, “what’s your app strategy?” and 2 years ago it was “are you a mobile first company?”, this year it was, “how are you thinking about mobility?” To that end, there was even an entire track of presentations and panels on this topic. A truly mobile 1st organization does not think in siloed roadmaps or experiences. It does not differentiate between digital and the in-store aisle. A mobile 1st organization recognizes that it’s the experience that’s mobile, not the device. Said another way, when product, marketing, design and data come together you are not bound by any one device or screen. The near-term mobility battleground is the car. While we’re years, if not decades from mass autonomous vehicle adoption, we are already in a world, where our cars are the most technology advanced mobile device in our household.

Those are the major takeaways I had. Yes, there were robots and drones and cameras. But, there wasn’t anything from those categories that was revolutionary and ready for mainstream.

Additionally, while Amazon did not have a booth, did not demo a product, did not host an event, they are the most present and talked about company. If you were releasing a new IOT product, you were touting an Alexa integration. If you were talking about streaming, content and publishing you were talking about Amazon Fire and Amazon Originals. The former Walmart digital executive really nailed it when he said, “if you’re a retailer focused on retail and not on becoming a platform, you’ll be Sears in 10 years.”

Lastly, CES left me with 2 big questions, that I don’t have answers to, but certainly make me think about the future of marketing.

The debate on cord cutting is over. It’s happened. Amazon, HBO, Netflix and others commanding your time and dollars. None of them have commercials. None of them have advertising package for companies like us to purchase. Every hour we spend in Netflix and not in traditional TV, increases the pressure for other advertising options to work better.

In a world where content is dynamically created and programmatically distributed, what harm are we doing to “brand”, as we chase efficiency. A marketer at Clorox shared, on a panel, that she can’t avoid selling through Amazon. The upside to Amazon is auto-reorder, which eliminates competition at shelf. But, it also reduces the impact of all the effort put into building a brand. Clorox, if you will, becomes a commodity.

Much thanks for reading through all of this. Trust me, this was the short version.

Took a trip to Nashville and The Bourbon Trail this past week. While in downtown Nashville, this type of sign was quite common in the boot stores.

Ironically, I took the photo of the sign telling me photos weren’t allowed. The list of things they don’t want you to do is certainly much longer than the list of things they DO want you to do. As far as I could tell, it was only 1 thing: purchase something.

Some might call this a response to the Amazon effect of retail locations becoming showrooms for people to experience a product, only to buy it for much cheaper online. I’m sure that’s a part of it. I’m more of the mindset that it’s an inability to accept the new business environment they’re operating in and an inability to develop a compelling smart solution to the problem. For example, they could highlight the value in supporting in a local business. They could have talked about their commitment to getting you into the right boot, instead of the boot you think you need. I’m just scratching the surface here. There were certainly options, beyond putting up a sign that would simply be ignored.

Behaviors matter. Behaviors are lasting. Behaviors are tough to change. To have such a sign up and to attempt the enforcing of it, is to for people to stop acting the way they normally act. Good luck.

Amazon Confirms That the Giant Amazon Box From Reddit Is Realhttp://on.recode.net/1aHKhbL
I love this. I love this for so many reasons. Bezos often says something to the effect, he’s in the business of delivering anything to anyone, anywhere in the world. I love that. As part of a lengthy marketing campaign with Nissan, Amazon just delivered a new Nissan Versa to someone. While it may take years for car buying to become a core competency of Amazon, these types of initiatives create energy around Bezos’ lofty aspirations. It’s a classic example of understanding that sometimes you’re not going to get a big immediate return on investment from an initiative, but there’s still many great reasons to invest in the initiative.

inMarket Rolls Out iBeacons To 200 Safeway, Giant Eagle Grocery Stores To Reach Shoppers When It Mattershttp://tcrn.ch/1aHKH1Q
So, yeah, mobile, it’s going to be big. If you don’t have someone at your organization who’s focused 100% of the time on mobile, you’re missing out. Mobile can’t be 5% of everyone’s job. The minute that happens, it slips thru the cracks. Apple’s iBeacon product was a smart extension. We’re going to see these types of platforms become commonplace in 3 years. Instead of just 10% of stores as a test, we’ll see NFC styled platforms in nearly 100% of locations. The only bummer from this announcement is the lack of creativity. The first thing retailers want to do with iBeacon is………..deliver coupons! C’mon it’s 2014, we’re better than that, aren’t we?

A closer look at Belkin’s Crock-Pot WeMo Slow Cooker (hands-on)http://engt.co/1aHL1O9
As a slow cooker aficionado, I’m excited by this. As a marketer, it’s yet another example that the “internet of things” is here and it’s not going anywhere, any time soon. Look at your home, look in your car, look at everything on your commute to work. If it could be connected to the internet, it will be. That’s why, to me, it’s not about digital marketing. It’s about marketing in a digital world. That’s a subtle, but very important nuance.

If a tweet worked once, send it again — and other lessons from The New York Times’ social media deskhttp://bit.ly/1iUDiED
Probably the best post I came across in the past week. There’s too much to cover in a brief snippet here, but the team at Nieman Labs did a great job of breaking down what the New York Times learned this past year, in social media. There’s basic stuff, that seems so obvious, but it’s also things we forget about too often. Definitely find time to read this one.

Six Things Every CMO Should Be Watching This Yearhttp://onforb.es/1iUEE1X
I like David Armano. We don’t always see eye to eye, but I like how his brain is wired. This article on Forbes from David does a nice job of painting a picture of things CMOs need to think about in 2014. I’d make some adjustments to the list. For example I’d combine his buckets for “Ephemeral Media” and “The Responsive Brand” into a larger bucket called the Content Conundrum. Every CMO is going to grapple with how to create enough content across a wide variety of networks, platforms and locations to make an impact…without breaking the bank. The mix of content providers and partners needed to deliver on this, will be like nothing we’ve ever seen before.

By now those who know me are tiring of my constant cry, “Real Estate Is King.” I’ve been telling anyone who’d listen for the past year and a half that your brands need to be owning property all over the monopoly board. Just owning Boardwalk isn’t going to cut it.

What does that mean? Since the dawn of the internet we’ve all been following the same funnel based model for success:

Run a bunch of advertising

Have the call to action for the advertising be to the brand’s site

Get people on to the site

Convert the people

In applying this model we were trying to drive traffic to 1 destination. In doing so, the focus was always on Unique Visitors. The baseline and focal point for success rested on increasing the number of unique visitors. If you were estimating a conversion benchmark of 10%, having more unique visitors increased the total number of conversions. Makes sense.

But, in leveraging that model, we didn’t take into account all the other interactions taking place throughout the web. Often these interactions were smaller…micro if you will. Despite being small, they definitely mattered; and they still do.

As companies look to engage consumers where they are (Twitter, Blogs, Facebook, etc.) something interesting is going to happen. Unique Visitors to the site are going to decrease. They’re going to matter less because the funnel isn’t linear.

Best Buy and Amazon recently announced that they are going to make their inventory available to any and all developers who want to create apps, widgets, or the like so that sales of the product could happen on this site. The idea is that they don’t care where the sale takes place, so long as it takes place. The path to purchase isn’t linear. Think about it. You could be on Facebook with the Amazon App installed, see a deal on that book you added to your wish list, and then buy it right there…with NO need to visit Amazon.com. Now, that’s value.

But, what are we going to do about those decreased traffic numbers? The implications are huge. Online publishers set their value based on their audience size. Is your site less valuable because it now gets less traffic? Again, maybe the real point is we need to look beyond unique visitors when determining what success looks like.

Make no mistake about it, real estate is king. If your focused on hoping people land on Boardwalk you’re going to lose this game. Start buying up property now.

I really want a Kindle. Every fiber in my body wants to visit Amazon.com, log-in, add the Kindle to my shopping basket, elect the overnight delivery option, and complete the transaction.

But, I don’t and I won’t. It’s not the money, battery life, form factor, selection of books, or features. Nope it’s something much simpler; there’s no easy way for me to convert my existing book purchases to the Kindle.

I have dozens of books that I’ve purchased on Amazon that are also available for the Kindle. In order to get those books on the Kindle I’d have to repurchase them AGAIN. Sorry, it’s not going to happen. I want to be able to access Freakonomics whenever I want. I re-read books often. I can’t even begin to count the number of times I’ve read Where The Suckers Moon. I’ve done a preliminary look at the Kindle catalog. It would cost roughly $1800 for me to re-purchase every book I own into the Kindle format. This is insane, no?

When the iPod came out I didn’t have to repurchase all my CDs. Instead I CONVERTED them to MP3s and synced them with the iPod. This made spending more than $300.00 for an iPod a simple proposition. I could take all of my music with me in one little light weight tool for a relatively fair fee.

I can’t imagine that I’m the only person who feels this way.

Would it be that hard for Amazon to do the following:

Scan your Amazon purchase history and let you “upgrade” to the Kindle format for free (ideally) or a nominal fee. They have all of the data – it doesn’t seem that hard.

Allow you to trade in your books for the Kindle format. You would go to Amazon.com select the books you are converting, pay in advance (nominal fee), and produce a shipping manifest with a barcode. You would mail/FedEx in your books along with the manifest. Amazon would match the books up against the manifest and assuming everything matches up, scan the barcode which would credit your account for the downloads. The books would then be donated to schools, libraries, and charities. Everybody wins in this situation.

I’m ready to buy a Kindle. Amazon just needs to make it easier for me transfer my library to it so that I can really take 100s, if not 1000s, of books with me wherever I go.

Tools on the internet continue to get smarter. Pandora Radio is one of my favorite examples. It serves up music based on the music I like and the music I don’t like. They do this in a real simple fashion. When a song comes on I can elect to click either a Thumbs Up or Thumbs Down icon. Simple, right?

Based on that feedback, Pandora optimizes my playlist. Pandora gets smarter with each piece of information I supply it. This isn’t exactly revolutionary right? Tivo, Amazon, and Netflix have been leveraging this type of approach for years now. Heck, even Facebook let’s you do that to the ads that are served. Yes, you can thumbs up or down an ad. Based on that information Facebook is supposed to get smarter and no longer show you an ad you clearly aren’t interested in.

This brings me to twitter. As you know I’ve been a big fan of implementing a rating system for twitter for a while now. When twitter was a kiddie pool this feature was a nice to have. But, now that twitter has become an ocean it’s a must have. Imagine being able to thumbs up or down a tweet and having twitter get smarter based on that feedback. Twitter could recommend new people to follow based the feedback and even filter out people from your stream.

To me, that’s value. Much like NetFlix you could compare rankings with your friends/colleagues and let their feedback influence the recommendations. That’s social media at its best right there. What would be even better is if twitter aggregated all the feedback across their membership base to score tweeters. Think about it. No longer would you have to simply look at the number of followers someone has a means of evaluating their value. The community would be able to influence and determine their value. On some level the community would be similar to deputies policing the twitterverse.

Of course not all of this would be free. Twitter after all needs to make some money. From a monetization standpoint, twitter could sell back the information from the community to individuals. Wouldn’t you like to know the raw numbers? If you care about your brand (personal or corporate) you should.

I have a sneaking suspicion as to why they won’t implement this feature, but that’s a whole other post.

I’m out on vacation this week. The keys to TheKmiecs.com have been turned over to a few, select, awesome guest writers. The following has not been edited by me and is the work and effort of the original author. I appreciate the time and thinking that went into this post and hope you will too. Enjoy!

It’s been a week since Denny’s ran their Superbowl ad featuring a free meal and all information seems to indicate a successful effort. The message was perfectly aligned with the economy. In a time when people are being laid off by the hundreds of thousand, offer a free breakfast to everyone in the country.

The company had seen considerable negative change in the past 20 years. They faced lawsuits accusing them of racism, and a growing public perception of inferiority, tarnishing a brand that was once widely known for good value.

Looking to put that behind them, this was an effort to reintroduce people to the value proposition of Denny’s meals. This was a big bet. Failure brings ridicule and questions on why the company spent $3 million on the effort. Success can be equally challenging, as Denny’s learned.

What Happened

Following the Superbowl and on Monday morning, Dennys.com experienced a surge in traffic with people looking for information on the offer and the location of the nearest restaurant.

According to comScore, 15% of all respondents visited an advertisers web site after seeing their web site, and 23% of those respondents visited Dennys.com. With a total audience of nearly 100 million viewers, that would place the number of visitors to Dennys.com around 3,500,000 people. Other reports vary in estimating traffic from a 434% to 1,700% spike. Both sets of figures are reasonable as the bulk of visitors likely came during peak times.

As a result of this spike, Dennys.com was largely unavailable to people after the Superbowl and Monday morning.

A Preventable Outage

It was predictable that Dennys.com would experience a significant surge following the ad. Unpredictable traffic from sources such as the DrudgeReport.com, Digg.com, and Twitter.com can lead to an unforeseen and overwhelming load on web sites, but placing a Superbowl ad requires advanced planning.

Note that Denny’s made the offer for breakfast on Tuesday morning. This may have been intended to give people time to coordinate going to Denny’s. There was clearly thought about the activation and timing of the program, but there was a either a miss in collaborating with their Digital Agency or Technology group, or a lack of experience in handling this type of event.

What Did Denny’s Miss?

It does not appear Denny’s made changes to their web site or hosting arrangement to prepare for the Superbowl traffic. A quick check of their site indicates two key misses:

From a brief review of the source code and scans for origin servers, it does not appear there was a Content Delivery Network (CDN) utilized for the site. A CDN reduces the work a web server must do by offloading the amount of work it performs. A CDN such as Edgecast, Akamai, Amazon Cloudfront, or Limelight places copies of the static assets of a web site on ‘nodes’. When a user requests a web page, they are first routed to the assets on these nodes instead of the web server. In my experience, a CDN can reduce the load on a web server by over 90%, while improving response times by up to 45%.The most recent detectable change in Denny’s hosting environment occurred in October 2008 when they upgraded to a new version of IIS. We cannot tell from this information if Denny’s added capacity to their web servers.

While it appears some steps were taken to minimize the number of queries required by users, the area most likely to be used by consumers was still partly dynamic (restaurant locator). Search of this type is among the most resource intensive. An alternative would have been to provide static navigation pages (state > city > locations). These could have been easily created by searching with the existing Content Management System and saving the results as static pages.

The cost to implement a CDN varies by vendor and capability, but I would estimate the total cost for both of these solutions to be less than $60,000 for the year.

The Negative Impact to Denny’s

The Internet provides us with enough information to make educated guesses on the impact of the failure. I’ve found it’s useful in the past to use a Customer Lifetime Value scenario to determine the impact of these decisions.

We first need to build a table of our assumptions:

Measure

Value

Method for Assumption/Calculation

Audience

100,000,000

Total potential audience of the advertisement.

Purchases per year

12

Estimated 1 trip per month.

Retention Rate per Period

70%

Estimated % of customers that return the following month for meal.

Average Purchase Value

$12.07

Recent breakfast ticket for two at Denny’s.

Profit Margin

20%

Estimated gross profit of restaurant.

Profit per purchase

$2.41

Dollarized gross profit of average ticket, calculated from Avg. Purchase with Profit Margin

Cost of Reaching a Potential Customer

$0.05

Audience size/cost of advertisement.

Response Rate

2%

Denny’s self-reported trial audience.

Coupon or other one-off costs

$2.30

Estimated cost per meal derived from Denny’s total promotion cost.

Total Customer Acquisition Cost

$2.35

Sum of per customer acquisition costs.

Technology Costs

$5,000

Estimated cost per month of CDN for program of this size.

These assumptions are based on public numbers, derived from figures Denny’s has released, some educated guesses, and my personal research on Thursday at the local Denny’s. For the sake of this exercise, we’ll keep this to a one-year analysis and ignore Discount Rate and Product Inflation.

The most controversial figure in this table is the retention rate. With the exception of telecommunications, most companies do not publicize their retention rate. This guess is an average based on estimates ranging from 53 – 85% in the restaurant industry.

Based on these assumptions, we can project that Denny’s would see the following results this year:

Q1

Q2

Q3

Q4

Total

Customers

3,066,000

1,051,638

360,712

123,724

4,602,074

Revenue

$37,006,620

$12,693,271

$4,353,792

$1,493,351

$55,547,033

Cost

$29,605,296

$10,154,617

$3,483,033

$1,194,680

$44,437,626

Profit

$7,389,060

$2,534,448

$869,316

$298,175

$11,090,998

For a stated cost of $5 million, $11 million in gross profit is an acceptable return. It also accomplishes the goals of reintroducing the brand to consumers, and the financial impact would not be limited to 2009.

But did Denny’s leave money on the table?

Let’s next assume Denny’s implemented the recommended technology steps at an additional cost, and as a result saw an increase of 5% in the response rate to the trial (to a total of 2.1%). What impact would that have on the overall program?

Q1

Q2

Q3

Q4

Total

Customers

3,219,300

1,104,220

378,747

378,747

4,832,178

Revenue

$38,856,951

$13,327,934

$4,571,481

$1,568,018

$58,324,385

Cost

$31,113,438

$10,681,764

$3,673,700

$3,673,700

$46,659,508

Profit

$7,743,513

$2,646,170

$897,781

$298,084

$11,664,877

The most immediate impact is Denny’s would have served 153,300 more customers on February 3. If we follow the same assumptions through the year and add the costs for the technology recommendations Denny’s would have realized an additional $573,879 in profit for the year. That is a 956% return on the technology investment.

Note: These figures also raise an interesting question into what type of retention programs they implemented. With retention driving significant dollars, was the bigger mistake to not leverage CRM?

What does this tell us?

This wasn’t a Grand Slam for Denny’s, but it was a solid double. Denny’s failure here isn’t critical from a financial perspective. The program will likely achieve profitability for the restaurant, and bring new customers into the stores. The idea with any trial promotion is to introduce people to your brand with the hopes a percentage of the trial audience will return and by those definitions, the company was modestly successful.

While the company will benefit from its efforts, I think it stumbled seriously with the online execution. There was no excuse for Dennys.com to be unavailable to users. For a company that has a reputation issue, not being able to serve people online is a failure. They had the advanced notice. Technology is readily available to serve capacity, and they were clearly thinking about the timing.

Located in Chicago, Rob Saker is a Marketing Technology & Analytics professional in the Consumer Goods industry. He can be reached at his blog at www.robsaker.com.

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Dad to Cora and John. Love ironing, bourbon and BBQ; not necessarily in that order. Living life, like I stole it. I'm always up for a spirited conversation. These are my thoughts and ramblings, not those of my employer.
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